Book summary: Ten Lessons for a Post-Pandemic World

Book summary: Written in the form of ten "lessons," covering topics from natural and biological risks to the rise of "digital life" to an emerging bipolar world order, Zakaria helps readers to begin thinking beyond the immediate effects of COVID-19.?Ten Lessons for a Post-Pandemic World?speaks to past, present, and future, and, while urgent and timely, is sure to become an enduring reflection on life in the early twenty-first century.

What Matters Is Not the Quantity of Government but the Quality

In October 2019, just a few months before the novel coronavirus swept the world, Johns Hopkins University released its first Global Heath Security Index, a comprehensive analysis of countries that were best prepared to handle an epidemic or pandemic. The United States ranked first overall, and first in four of the six categories. That sounded right. America was, after all, the country with most of the world’s best pharmaceutical companies, research universities, laboratories, and health institutes.

But by March 2020, these advantages seemed like a cruel joke, as Covid-19 tore across the United States and the federal government mounted a delayed, weak, and erratic response. By July, with less than 5% of the world’s?population, the country had over 25% of the world’s cumulative confirmed cases. Per capita daily death rates in the United States were ten times higher than in Europe.

These ills of government are an American, not a democratic, disease. Many other democracies handled this pandemic effectively, better than any dictatorship. That list includes countries run by political parties of all stripes. Does this muddle tell us anything? Mostly that the old ideologies are obsolete. The divide that has organized politics for centuries has been between left and right. The Left has advocated a larger role for the state in the economy. The Right has staunchly?defended free markets.

For the twentieth century, the great political debate was about the size and role of government in the economy—the quantity of government. But what seems to have mattered most in this crisis was the?quality?of government.

Today, the United States has fewer government officials per capita than most other advanced democracies. Public service is no longer the prestigious career it once was. Hiring freezes and budget cuts have had their effect.

From Reagan onward, people have tended to assume that government causes more problems than it solves, that all federal agencies are bloated, and that most tasks are best handled by the private sector. Politicians on the right often used the phrase “starving the beast” to describe their strategy toward the government.

To these factors, add American federalism. Many of America’s dysfunctions are multiplied because they are replicated at the state and local levels. The creation of a national strategy for the pandemic, for example, was complicated by the existence of 2,684 state, local, and tribal health departments, each jealously guarding its independence.

We like to celebrate American federalism. And it does allow for useful and important experiments; what Louis Brandeis called “laboratories of democracy.” States compete against each other for investment and workers, which can spur growth.

But this patchwork of authority is a nightmare when tackling a disease that knows no borders.

Over the last few decades, America’s extraordinary position of power has shielded it from the consequences of a government that consistently executes badly. So many of America’s recent efforts—from the occupation of Iraq to the simple extension of subway lines—have been costly disasters.

For decades now, compared with citizens of other advanced countries, Americans have put up with a government that is second-rate at all levels.

The country can compensate. Washington has the world’s reserve currency and can print trillions of dollars. It still boasts the largest military on the planet. America has a huge tech industry, dominating the digital world. The country’s vast internal market means that it can ignore many of the pressures of trade and external competition. But these are crutches. They prop up the country, allowing it to escape penalties, never really experiencing the true costs of its mistakes—until now.

While American military power might still outrank all others, the lives of average Americans would continue to slip behind,?oblivious to the improvements abroad. The country could become more parochial and less global, losing influence and innovation, all the while consoling itself with fantasies that it is utterly exceptional.

For many decades, the world needed to learn from America. But now America needs to learn from the world. And what it most needs to learn about is government—not big or small but good government.

Markets Are Not Enough

Professions like law, banking, and accounting used to be guided by principles that required that they not maximize profits if it came at the cost of sacrificing their independence and integrity.

Once upon a time, these people would tell their clients?not?to do deals?rather than eagerly lap up all business. Groups that served as gatekeepers and mediators in society and the economy have become profit-driven enterprises selling their seals of good housekeeping to anyone who will pay—no matter the conflicts of interest or broader risks.

Before the 2008 financial crisis, the rating agencies—supposedly independent and impartial—eagerly put their stamps of approval on shoddy, risky financial products because they were paid handsomely to do so.

The studies on this topic are so numerous and convincing that even the staunchly conservative?National Review?published an essay that concluded, “What is clear is that in at least one regard American mobility is exceptional?.?.?.?where we stand out is in our limited upward mobility from the bottom.” ?A Stanford study set out to quantify the American Dream, defining it as “the probability that a child born to parents in the bottom fifth of the income distribution makes the leap all the way to the top fifth of the income distribution.”

The aggregate data shows that low-income Americans have a 7.5% chance of moving that far up the economic ladder, compared to 11.7% for low-income Danes and 13.5% for Canadians—almost double the chance of their Americans counterparts.

The American Dream, in other words, is alive and well, just not in America.

Denmark is successful politically because it is successful economically—and vice versa. Regulations, properly tailored, can ensure that competition is free and fair. Tax policies can be geared to help workers more and capital less.

The government must get back to making major investments in science and technology. Education and retraining also need more funding, which should go hand in hand with restructuring these government programs to minimize bureaucracy and focus on the goal—providing the best education.

The challenge is to make it possible for citizens to face that environment of global competition and technological dynamism?armed—with the tools, training, and safety nets that will allow them to flourish.

Inequality Will Get Worse

The richest and most successful countries in the world are an exception to this trend; inequality has risen sharply in many of them. That is especially true of the United States, where the Gini coefficient has climbed to its highest level since 1928, when it had soared from years of unchecked capitalism that led to the Great Depression and then the reforms of the New Deal.

The decline in global inequality was in large part caused by sustained economic progress in China, India, and other developing countries, which grew much faster than developed countries over the last quarter century, narrowing the gap and lifting hundreds of millions of people out of poverty.

All this has caused many problems, from toxic air and dirty water to overcrowded roads and trains. But at the same time, it has slashed the kind of poverty that caused so many children to die of malnutrition.

In September 2000, the United Nations established its Millennium Development Goals. One of them was to cut in half the share?of people living in extreme poverty (defined as living on less than $1.25 a day) by 2015.

That goal was met five years ahead of schedule. Worldwide, the total number of people who live in extreme poverty dropped from 1.9 billion in 1990 to 650 million in 2018.

On one crucial metric, the progress has been immense: the mortality rate for young children dropped 59% over the same period.

With Covid-19, much of this progress could be reversed. The pandemic might erase many of the gains made by developing countries over the last quarter century and return us to a world of great and widening global inequality.

In many developing countries, large segments of the population?make just enough each day to feed themselves and their families. So governments faced a dilemma: If they shut down the economy, people would starve.

If they kept it open, the virus would spread. Given that these governments don’t have the money to pay people to stay home or subsidize shuttered businesses, the wisest course, in retrospect, was probably not to impose full-scale lockdowns. India, for example, partly as a result of the lockdown, is on track to see its economy shrink by 5% in 2020, rivaling the worst performance in its history. And yet, as of July 2020,

the number of people confirmed to have died from Covid-19 in the country was about 28,000, fewer than the 60,000 children who die of malnutrition there?each month.

Even supposing, as seems plausible, that deaths from the disease are being vastly undercounted, this horrifying figure puts Covid-19 in perspective for the developing world.

Though intended to save lives, the shutdown of nearly all activity led to economic collapse. This has caused untold hardship and ironically, exacerbated many health problems, from hunger to depression. Was it worth it?

These are difficult decisions, but one cannot but think that in many developing countries, not enough thought was given to the calamities that would follow a lockdown.

This is probably why, when cases spiked after quarantines were lifted, few developing countries even considered reimposing them.

After the paralysis comes the inevitable debt crisis. In the United States, Europe, Japan, and China, the economic damage is brutal, but it will be ameliorated by massive government spending to soften the blow. These countries, America above all, can borrow trillions of dollars at low interest rates?with relative ease. That’s not the case for poor countries that are already deeply indebted. Capital is a coward, as the saying goes, and in the first months of the pandemic, over $100 billion fled from emerging markets. To keep their economies afloat, these countries will have to take out loans in dollars and at high interest rates, which they must pay back in their own rapidly depreciating currencies.

Down the line, without massive debt forgiveness programs, they will face the real prospect of hyperinflation or default.

The Big Gets Bigger

The Internet was meant to be the ultimate equalizer, providing small start-ups access to customers everywhere. And there is some truth to this idea. But the larger truth is that?far from being a platform that has enabled competition,

the Internet by nature encourages the creation of monopolies on a scale rarely seen in history.

Today, the leading company in a given sector routinely has around 50% of the market share. Indeed, in e-commerce and social networking, people often cannot quickly bring to mind the number two player to, say, Amazon or Facebook.

The new force reshaping information technology is big data—which multiplies the advantages of size.

Most big companies can invest heavily in technology, often creating customized programs that harness data to make operations more efficient.

But the advantages of size go beyond Internet companies. Large firms tend to have stronger lines of credit and can weather storms. They have regional or global brands and wider networks of supply and demand.

If some economies recover fast while others stay stagnant, big companies can take advantage by concentrating on areas of growth in a way that a small local business cannot.

In 1970, the top 1% of income earners captured less than 10% of all national income. In 2019, that number passed 20%. By contrast, the bottom 50% of earners have seen their share of income go in the opposite direction, from 22% in 1970 to 15% today. And finally, when you calculate inequality by wealth, rather than by income, the results are almost unimaginable.

The top 10% of America owns almost 70% of the total wealth of the country—from houses and cars to stocks and bonds—while the bottom 50% own just 1.5% of assets.

Back in the 1980s, Reagan’s heady vision seemed to promise that America could grow its way out of addressing poverty and inequity. In 2020, growth—at least in developed countries?like the US—looks likely to stay sluggish, as it has for two decades. Inequality in America looms worse than ever, the worst in the Western world, even after accounting for taxes and government transfers.

By its Gini coefficient, America is closer to Brazil than to a European country like Denmark.

Globalization Is Not Dead

In addition, people became deeply concerned about their reliance on overseas producers for key medical supplies.

One in every three pills taken by Americans, for example, are generics produced in India, which itself gets two-thirds of pharmaceutical ingredients from China.

With far fewer flights, the per-pound cost of transporting goods across the Pacific tripled. Seeking security, many governments—from the EU to Japan to India—announced their resolve to pursue greater self-sufficiency, or at least make the system of global supply chains more resilient.

Overall, the global economy remains deeply interconnected. The broadest measure, the “trade openness index,” which looks at all exports and imports as a share of the total world economy, was down to 54% in 2016 from 61% in 2007.

But look at the chart historically, and since 1945, when trade openness stood at about 10%, you see an almost unbroken upward path of increasing globalization. The fallback since 2008 is real but small, a blip on the long-term trend.

For many countries, however they might couch it, the fear is less a general unease with dependence on foreign countries;

it is specifically a fear of dependence on China. This concern,?which predates the pandemic, is rooted in the legitimate worry about the massive concentration of supply from that one country—70% to 80% of global production for some consumer products.

These efforts are motivated not only by a desire to diversify supply chains but also by

concerns about China using its market power for geopolitical purposes.

But the easiest way to diversify away from Chinese suppliers is to move factories to places where companies can still keep production costs low without worrying about great-power politics, such as Vietnam or Bangladesh or Romania. This transition was already under way, as China becomes a middle-income country and its labor costs rise.

Whatever the virtue of these moves—and some are justified—they do not herald the end of globalization. They merely represent a reorganizing within the world of trade and cross-border investment.

But the biggest shift in global economics in recent years has been the rise of the digital economy, which is by nature global. Companies around the world are selling their products on platforms like Amazon, Facebook, and Alibaba and using digital tools to enhance production, marketing, and delivery. As a result, the digital economy is booming. Most online services traverse borders continually and invisibly. That’s why the economists Susan Lund and?Laura Tyson make the case that globalization is not in fact retreating; it’s just changing forms.

In short, globalization isn’t dead. But we could kill it.

The World Is Becoming Bipolar

There are reasons to worry. The United States’ poor handling of the pandemic highlighted weaknesses in its own domestic system and undermined its image as the world’s leader, feeding disenchantment with the American model of capitalism and democracy. The racial divide persists, unhealed.

When I was growing up in India, people criticized American foreign policy but still saw the American model as the most advanced and successful in the world.

Today, they look at that model with much greater skepticism and, yes, sometimes even pity.

But the reality is that America, for all its flaws, continues to perform extremely well on the most basic measure of global power: economic heft. The United States hosts a majority of the world’s largest and most technologically advanced companies. The world’s reserve currency remains the US dollar, which has only expanded its reach in recent years, now accounting for almost 90% of all currency transactions.

And of course, Washington has the world’s most powerful military by far, spending more on defense than the next ten countries combined—half of which, as US treaty allies, are on its team.

What has shifted noticeably in recent years is America’s “soft power”—often defined as its appeal, example, and capacity to set the agenda. The scholar who invented the concept of soft power, Joseph Nye, and who has generally been skeptical of American decline, has warned in recent years of unmistakable signs of the erosion of America’s soft power.

Nye notes that global attitudes toward the United States have soured. In a 2018 Pew Survey, only 50% of those polled across twenty-five countries held a favorable view of it, compared with 43% who held an?unfavorable view. But, beyond personalities, this slide seems to have more to do with what is going on outside America rather than within.

Any discussion of the rise of China begins with the key underlying trend: economic growth. At the start of the post-Cold War era, the country accounted for less than 2% of global GDP. Now it accounts for 16%.

For the last decade, China has been the single largest source of global growth. It is now the world’s number one trading nation in goods, taking the place of the United States, which had held that position for seven decades. seven decades.

In other words, China has arrived. Its rise has been so dramatic that one can now see the outlines of a bipolar international system.

The United States remains the number one nation by far, but the distinguishing feature of any bipolar system is that the two top powers are miles ahead of all the others, and that is certainly true of the United States and China.

In 2020, China’s share of global GDP ranks second, but it is almost as large as that of the?next four countries combined. Its defense budget is now second only to the US—but there too, China’s military spending is larger than those of the next four countries put together.

By comparison, today’s China is a remarkably restrained nation on the geopolitical and military front. It has not gone to war since 1979, when it briefly invaded Vietnam. Nor has it funded or supported proxies or armed insurgents anywhere in the world since the early 1980s.

That record of nonaggression is unique among the world’s great powers. All the other permanent members of the UN Security Council have used force many times in many places over the last few decades—a list led, of course, by the United States.

But what would be an acceptable level of influence for China, given its economic weight in the world? If Washington does not first ask this crucial question, it cannot make serious claims about which uses of Chinese power cross the line.

When in 1990 Deng advised fellow Chinese leaders to bide their time, the country was impoverished, with a puny economy. That economy has expanded by 800% and is now a colossus.

China bided its time and developed its strength, and today, it is seeking a larger regional and global role as all great powers do as they rise in wealth and strength.

How much larger is appropriate and how much constitutes dangerous expansionism? That is the fundamental strategic question that Washington and the world have never seriously examined.

Consider the case of another country that was rising in strength, this one back in the nineteenth century, although not nearly on the scale of China today. The United States in 1823 was what would now be called a developing country—a nation of farmers, with poor infrastructure, not even among the world’s top five economies—

and yet with the Monroe Doctrine, it declared the entire Western Hemisphere off-limits to the great powers of Europe. Britain reluctantly acquiesced, accepting and sometimes even enforcing US regional hegemony.

The American case is an imperfect analogy, but it serves as a reminder that as countries gain economic strength, they seek greater influence abroad.

If Washington defines?every such effort by China as dangerous, it will be setting itself up against the natural dynamics of international life and creating a self-fulfilling prophecy.

American foreign policy elites of both parties have grown comfortable with a world in which the United States is the undisputed leader.

In 2019, Secretary of State Mike Pompeo asserted—in a patronizing statement that would surely infuriate any Chinese citizen—

that the United States and its allies must keep China in “its proper place.” China’s sin, according to Pompeo, is that it spends more on its military than it needs to for its own defense.

The same, of course, could be said of the United States—and of France, Russia, the United Kingdom, and most other large countries.?

American hawkishness is rooted in the fear that China might at some point take over the globe. This is a dangerous fear, because historically, when the dominant power believes that it is losing ground to a new challenger,

it often acts preemptively, hoping to take advantage of a perceived “window of vulnerability” after which the challenger’s rise becomes unstoppable.